Guy Kawasaki has an excellent post on the symptoms of a startup heading off track and some excellent suggestions on what to do when each of them happens. I've seen each of his nine scenarios happen. Sometimes, the company fails; often it can turn it around - in many cases by following the path Guy suggests.
It's not unusual that in the midst of a crisis, the CEO and/or his team can get the feeling that their situation is dire and no one has ever faced the same issue before. Happily, few of us are talented enough to invent new ways of failing - most of the ways we fail are tried and true, and have been perfected by many who have gone before us. Guy's been nice enough to educate us on some of the most successful ways to drive a startup into a ditch.
Guy's post should be required reading for everyone on your startup team, from the founder/ceo to the developers to the marketing people. Everyone should know what to watch for, and understand when the leadership takes action to improve the situation.
Of all the scenarios Guy provides, the most important one to see, and to learn from, is number 4:
4. Problem: Our team is not getting along.
How you got here: You’re in this position because this is how it always goes. Companies don’t ship on time, watch sales go the roof, go public, and kick back. Startups are messy. Things go wrong. People don’t get along. If it was easy, everyone would do a startup and be rich. Welcome to the real world.
What to do now: You work things out. You keep talking. You try to get an experienced outsider to provide a fresh perspective. There’s no magic bullet to fix this—it simply takes time. The same time, by the way, to finish the product and achieve sales because not getting along is the flip side of poor sales. If sales were booming, believe me, you’d probably be getting along—if not euphoric.
One thing you don’t do is lynch people because you want to (a) set a precedent; (b) show everyone you can make tough decisions; and (c) get it over with. You should give people a second chance. Maybe even a third chance. Focus on the positive: how people can help an organization, not how they are hurting it.
You have a moral obligation to give everyone a chance to change their ways and to succeed. If you don’t fulfill this obligation, then the unintended message that you’ll send through the organization is: “Anybody could be gone, so don’t piss me off.”
More often than not, a failure of a team member is a shared failure on the part of that person and the people managing him. That doesn't mean that you don't make tough decisions and fire people, even if you accept a decent share of the blame for it not working out. It does mean that you work with people to try every avenue before you do, unless there are security or ethical or moral issues involved that make an immediate termination necessary.
I have always found that you get a lot more out of people who want to work with you than you do out of people who are afraid of you, or worse yet respect you only for your title and not for your leadership.
Which brings up the importance of openness and communication. If you ask your team to give everything they've got and you trust them with the success or failure of your company, you can trust them to be grownups and be able to handle the truth about what is going on. Besides, the fewer closed-door phone calls and secret agendas, the less time people spend talking about what's really going on and the more time they have to actually do productive work.